Exporting as a Driver of SME Growth

Why is exporting important for Canadian SMEs and our future economy?

From the beginning, Canada has always been a nation of traders. Whether it was fur, forestry, agriculture, or machinery, the world has trusted Canada to be a provider of good quality products and services for over 400 years. In many ways, exporting drove the economic growth upon which this great nation was established.

Today, Canada has one of the fastest growing economies in the G7 and boasts some of the most innovative companies in the world. Internationally, our global brand is strong once again and the world wants – and needs – more Canada.

While global trade has increased, Canada’s share of global exports has been on a downward trend. Today, China leads the world in exports and Canada is only the 12th largest export economy in the world. As of 2017, 12% of our small and medium-sized businesses export goods and services. This is a lost opportunity for Canada.When Canadian firms export, they become more productive; they create more jobs; they grow and scale at higher rates; they take on new challenges, develop lessons learnt and invest more in research and development. For those who may believe exporting to be risky business, studies show that diversification of clients actually reduces risk for a company, making them better equipped to deal with economic or political changes.

“As of 2017, 12% of our small and medium-sized businesses export goods and services. This is a lost opportunity for Canada.”

Canadian SMEs seeking to expand their operations at an international level need to increase their awareness of the resources at hand, the funding programs in place, and the tools and the guidance provided on export relations and global trade. The Canadian government has set the framework and now it is time for entrepreneurs to discover it and harness its potential.

How can we get more Canadian SMEs to export?

Our government launched the Export Diversification Strategy with a target of increasing Canada’s overseas exports by 50% by 2025. To achieve this goal, we have concluded trade agreements with the European Union through the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), with the United States and Mexico through the new North American Free Trade Agreement, and with the Pacific Rim nations through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Additionally, we are the only country in the G7 to have a trade agreement with all other G7 countries. We also have bilateral agreements with the Ukraine, Israel, South Korea and Chile and most recently have had productive discussions with ASEAN and South American countries. Today, Canada has access to 51 countries, 62% of the global economy, and over 1.5 billion new customers through 14 trade agreements.

Despite concerted efforts to open up access to new markets, Canadian small and medium-sized businesses are still slow to export to new markets. In fact, in 2018, 75% of our exports were destined for the United States. Many small and medium-sized businesses believe that exporting looks like a lot of work and a lot of risk. They worry about a steep learning curve, complicated tariffs and regulation, lack of capital, intellectual property and patents, customs, security, lack of market research – you name it – and they are not wrong. That is why the government is investing $1.1 billion in an Export Diversification Strategy, to provide businesses with resources to get exporting, reap the benefits and grow.

How available is capital for Canadian SMEs seeking to grow at home and abroad?

With a $1 billion investment to help Canadian companies seeking to grow, the Canadian Business Growth Fund (CBGF) helps fill a gapbetween the small-scale financing options generally available to entrepreneurs and smaller firms, and the range of sources available to larger, more established companies .

Our government has made historic investments through the Innovation and Skills Plan in a range of programs that help businesses of all sizes access capital for everything from debt financing, to research and development, to patents.

“Canada’s venture capital ecosystem – virtually non-existent just a decade ago – has doubled in size and is no longer a flyover destination for investors.”

Because of government investment for instance, Canada’s venture capital ecosystem – virtually non-existent just a decade ago – has doubled in size and is no longer a flyover destination for investors. Our $450 million investment in venture capital have leveraged $1.5 billion in matched private sector investment and supported countless Canadian companies while creating thousands of middle-class jobs. Canadian small businesses also have access to ample funding through the Business Development Bank of Canada, Canada’s only bank devoted to entrepreneurs.

What are the main challenges Canada’s SMEs face and how can Canadian governments alleviate them?

While Canada has one of the lowest small business tax rates in the world, helping our small businesses be more competitive, many small business owners report that accessing capital, finding skilled workers and dealing with red tape still remain a challenge.In response to this, we continue to invest in Canadian businesses with programs offered by Futurpreneur Canada, the Business Development Bank of Canada’s Women in Technology Venture Fund, Export Development Canada and many more programs specifically designed for Canadian entrepreneurs and SMEs.

We are also making changes to the criteria of the Scientific Research and Experimental Development (SR&ED) program and making changes to accelerated capital costs so that more SMEs can benefit and sooner.

“Many small business owners report that accessing capital, finding skilled workers and dealing with red tape still remain a challenge.”

In terms of regulation, we have cut over 400 administrative burdens since 2015 and are modernizing regulation across government.

As for the workforce piece of the puzzle, we are working to develop programs that will help businesses attract, employ and retain skilled employees. The Global Skills Strategy is a great resource to explore, which features faster application processing times, work permit exemptions and enhanced customer service.

How can we empower and embolden women entrepreneurs specifically?

Women’s economic empowerment is not just the right thing to do; it’s good for the bottom line. The full and equal participation of women in the economy is essential to Canada’s competitiveness.

In McKinsey Global Institute (MGI)’s, The Power of Parity: Advancing women’s equality in Canada, it is shown that an increase of the number of women entrepreneurs and women in the workforce could add $150 billion in incremental GDP or a 0.6% increase of Canada’s annual GDP growth in 2026. That’s 6% higher than business-as-usual GDP growth forecasts over the next decade. Put another way, this figure is equivalent to adding a new financial services sector to the economy.

“An increase of the number of women entrepreneurs and women in the workforce could add $150 billion in incremental GDP or a 0.6% increase of Canada’s annual GDP growth in 2026.”

There are 1.2 million small and medium-sized businesses in Canada but only 16% are owned by women. Our government is taking action with Canada’s first Women Entrepreneurship Strategy. The $2-billion investment aims to double the number of women-owned businesses by 2025 by increasing their access to financing, talent, networks and expertise. Through this strategy we have invested in over 200 women-owned or led companies across Canada, and created national and regional ecosystems of support.

Correspondingly, other initiatives like the Business Women in International Trade (BWIT) program provided by the Trade Commissioner Service (TCS) helps open doors and opportunities for Canadian women-owned businesses to successfully expand into global markets. The most exciting part is that it is a full-cycle strategy as it will greatly benefit the Canadian economy.

The Women Entrepreneurship Strategy complements our government’s efforts to advance gender equality, which include addressing pay equity, introducing more affordable childcare and putting an end to gender-based violence.

Part of the Entrepreneurship Series presented by: